Crude Oil Surge Weighs on Auto, Metal Shares, With Tata Motors, M&M, and JSW Steel Suffering Losses of Up to 4.5%

Market Update: Metals and Autos Under Pressure

Monday's Trade Sees 6% Drop in Auto and Metal Shares

The Nifty Metal index extended its losses for a second consecutive session, plummeting 4% during the day. The index's constituents, including Steel Authority of India, Jindal Stainless, and Tata Steel, fell by 6%, 4.39%, and 3.94%, respectively. All 15 members of the Nifty Metal index traded in the red.

The decline is attributed to a surge in crude oil prices, which has raised concerns over input costs. Metal production is energy-intensive, and higher fuel prices increase expenses related to mining, smelting, and refining. Additionally, higher transportation costs for moving raw materials and finished products contribute to the pressure on metal shares.

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Unless companies can pass on higher costs to customers, rising energy prices could compress margins and weigh on valuations. Analysts also note that persistently high oil prices may slow global economic growth, potentially affecting demand for industrial metals.

The Nifty Auto index has declined 5.5% over the past two sessions, with all 15 constituents trading lower. UNO Minda and Tata Motors Passenger Vehicles were among the major laggards, declining up to 6%. Shares of Mahindra & Mahindra and Tata Motors also saw selling pressure.

Auto shares typically react negatively to rising crude oil prices, as higher fuel costs tend to stoke inflation concerns. This can reduce the likelihood of interest rate cuts by the Reserve Bank of India, keeping borrowing costs elevated. Higher loan rates can impact demand for vehicles.